2024 (5) TMI 594 - HC - Income Tax

Addition of excess jewellery found in search - addition of 1099.96 gms of gold out of 10514.960 gms of gold and 14.05 carats of diamond that was found at the residence of the petitioner at the time of search - HELD THAT - Circular No.1916 of CBDT dated 11.05.1994 on Instances of seizure of jewellery of small quantity in the course of operation u/s 132 makes it clear that the Authorized Officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case decide to exclude a larger quantity of jewellery and ornaments from seizure. Para (iv) makes it clear that a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes. Thus the purport of the above circular is confined only at the stage of investigation of seizure and not to the stage of assessment. Therefore the complaint of the petitioner that the circular has not been followed cannot be countenanced. Under these circumstances no case is made out for interfering with the impugned order. However liberty is given to the petitioner to pursue the alternate remedy before the Appellate Commissioner in terms of Section 246A of the Income Tax Act 1961.

Summary

Issues:
Challenge to assessment order u/s 143(3) r/w 254 of the Income Tax Act, 1961, Compliance with CBDT Instruction 1916 dated 11.05.1994.

Assessment Order Challenge:
The petitioner challenged the assessment order confirming tax on a portion of gold and diamond found during a search, following a previous adverse assessment order. The Appellate Commissioner partly allowed the appeal, reducing the addition made by the Assessing Officer. Subsequently, the Tribunal remanded the case for verification of the source of jewellery purchased by the petitioner through banking channels or accounting entries.

Compliance with CBDT Instruction 1916:
The petitioner contended that the respondent failed to comply with CBDT Instruction 1916 dated 11.05.1994, which sets limits on seizure of jewellery. The petitioner argued that the circular provides a clear limit on jewellery seizure and that the respondent did not consider the explanations provided. The respondent, however, argued that the circular pertains to restrictions on seizure during inspection and not post-seizure assessment.

CBDT Instruction 1916 Clarification:
The circular states that an Authorized Officer may decide to exclude a larger quantity of jewellery from seizure based on family status, community customs, and other circumstances. It emphasizes preparing a detailed inventory of seized jewellery for assessment purposes. The circular's purpose is limited to the seizure stage and not assessment, as clarified in its provisions.

Conclusion:
The Court found no grounds to interfere with the impugned order, granting the petitioner liberty to pursue the alternate remedy before the Appellate Commissioner. The Court extended the time for filing an appeal by 30 days from the date of receipt of the order. The Writ Petition was disposed of with no costs, allowing the connected Miscellaneous Petition to be closed.